Employers set to benefit from introduction of RTI reporting for PAYE

June 7, 2013 - PRLog -- On 6th April 2013 a new system of reporting PAYE (Pay as You Earn) income tax information was introduced for employers in the UK.

PAYE is the income tax and national insurance contribution made by each employee, which is calculated using their individual tax code and deducted from their salary by their employer.

Until the start of April, employers sent reports containing this information annually for each employee to HM Revenue & Customs. This system was thought not to accurately reflect modern, changeable working patterns, so employers will now be required to provide HMRC with Real Time Information (RTI) on or before the day they pay their employees, using payroll software. Companies with fewer than 50 employees have been allowed to submit monthly reports until October 2013, to allow them time to adjust their processes and implement the new system. All other companies are now required to submit RTI every time they make a payment to their employees.

HMRC is confident that the new system will increase accuracy, reduce instances of over- and under-payment and prevent tax fraud.

Steve Rosler, Director at Crown Debt Rescue believes that the introduction of RTI presents a positive opportunity for employers. “This new system has been designed to reflect today’s working styles. Jobs and pay are more flexible now than they were when the original PAYE system was introduced, and – generally speaking - people change jobs much more frequently now than they did then. Then there are employees’ expenses and benefits packages to take into consideration as well, all of which combined mean that calculating PAYE is far more complex now.

“Any change of process takes a while to get used to, but we would advise that having an up-to-date, correct set of personal information for each employee including address, date of birth and national insurance number will make the transition easier for businesses to deal with.

“Being required to report far more frequently will mean that employers will now be able to keep up to date with their PAYE as opposed to reporting only once each year. It will be much easier for them to manage and keep on top of.

“Employees stand to gain too. Previously incorrect tax calculations have been left to mount up over the course of a year, and countless people have found themselves owing HMRC a large chunk of money which they struggle to find. In theory the new system should pick up any errors far quicker so they can be rectified straight away and any discrepancy amounts will therefore be smaller.

“Real time reporting should also bring another significant benefit. Hopefully it should improve cash flow for businesses, as they will be required to make smaller, more regular payments to HMRC than they do currently when settling their PAYE responsibilities annually. We are hopeful that this will mean that fewer employers fall into arrears with their PAYE payments to HMRC, as the payments they need to make will be of a far more manageable size for them to cope with. This should result in fewer businesses being forced to cease trading when they are not able to fulfil their PAYE obligations, which can only be seen as a positive thing for companies operating in these challenging times.”

Find out more about Crown Debt Rescue - http://crowndebtrescue.co.uk/